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On equilibrium cyber risk

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  • Ramírez, Carlos A.

Abstract

I develop a simple model to study how the interplay between institutions’ and hackers’ incentives can alter cyber risk within an equilibrium context. By formalizing the strategic interaction between institutions and hackers, the model characterizes how changes in heterogeneity across institutions, cybersecurity technologies, and hacker competition can lead to material shifts in cyber risk.

Suggested Citation

  • Ramírez, Carlos A., 2025. "On equilibrium cyber risk," Economics Letters, Elsevier, vol. 251(C).
    • Handle: RePEc:eee:ecolet:v:251:y:2025:i:c:s0165176525001442
    DOI: 10.1016/j.econlet.2025.112307
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    References listed on IDEAS

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    1. Anil K. Kashyap & Anne Wetherilt, 2019. "Some Principles for Regulating Cyber Risk," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 482-487, May.
    2. Chang, Jin-Wook & Jayachandran, Kartik & Ramírez, Carlos A. & Tintera, Ali, 2024. "On the anatomy of cyberattacks," Economics Letters, Elsevier, vol. 238(C).
    3. Hao Jiang & Naveen Khanna & Qian Yang & Jiayu Zhou, 2024. "The Cyber Risk Premium," Management Science, INFORMS, vol. 70(12), pages 8791-8817, December.
    4. Aldasoro, Iñaki & Gambacorta, Leonardo & Giudici, Paolo & Leach, Thomas, 2022. "The drivers of cyber risk," Journal of Financial Stability, Elsevier, vol. 60(C).
    5. Antonis Kotidis & Stacey L. Schreft, 2022. "Cyberattacks and Financial Stability: Evidence from a Natural Experiment," Finance and Economics Discussion Series 2022-025, Board of Governors of the Federal Reserve System (U.S.).
    6. Kamiya, Shinichi & Kang, Jun-Koo & Kim, Jungmin & Milidonis, Andreas & Stulz, René M., 2021. "Risk management, firm reputation, and the impact of successful cyberattacks on target firms," Journal of Financial Economics, Elsevier, vol. 139(3), pages 719-749.
    7. Crosignani, Matteo & Macchiavelli, Marco & Silva, André F., 2023. "Pirates without borders: The propagation of cyberattacks through firms’ supply chains," Journal of Financial Economics, Elsevier, vol. 147(2), pages 432-448.
    8. Rey, Hélène & Jamilov, Rustam & Tahoun, Ahmed, 2021. "The Anatomy of Cyber Risk," CEPR Discussion Papers 16217, Centre for Economic Policy Research.
    9. Eisenbach, Thomas M. & Kovner, Anna & Lee, Michael Junho, 2022. "Cyber risk and the U.S. financial system: A pre-mortem analysis," Journal of Financial Economics, Elsevier, vol. 145(3), pages 802-826.
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    Keywords

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    JEL classification:

    • D39 - Microeconomics - - Distribution - - - Other
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management

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